AUDITING ASSIGNMENT 1
Please complete answers to the following questions. This may be done in groups or individually.
Question 1 ( 12 marks)
You ,the auditor, attended the inventory count (stocktake ) of your client Smith Equipment and observed the following during the count :
1. Warehouse staff counted specific areas of the stock as determined by the warehouse supervisor ;
staff members ,including the warehouse supervisor , were allocated their own area to count on
their own.
2. Several blank sheets of paper were issued to each member of staff doing the counting.
3. Staff were instructed to write down the stock description and number counted .
4. Staff were told to write the stock quantities in pencil on the sheets to ensure errors can be
corrected .
5. Any staff that completed a section early were allocated to another area to help out one of the
other staff .
6.The supervisor collected all sheets at the end of the count to finalise the stock count .
Required :
Identify the weaknesses in the stocktake procedures above and identify how they could be improved.
Question 2 ( 10 marks )
You , the auditor , have spent 5 years as an auditor . In this time you have come across numerous
errors in performing bank reconciliations . The following are some of these errors:
1. An unreconciled item of $340 was on the final bank reconciliation of the client and was deemed
by the client to be immaterial.
2.Two deposits totalling $4070 relating to accounts receivable were collected on 3July ( 30 June year
end) but recorded as cash receipts on 30 June.
3.An amount from an associate company of $40,000 was banked 2 days before the end of the year in
the client’s bank account and then paid back 1 week after the end of the year .
4.A cheque for $6,000 was omitted from the outstanding cheque list on the bank reconciliation at 30
June . It cleared the bank on the 14 August .
5.A bank transfer of $20,000 was included as a deposit in transit at 30 June in the accounting
records.
Required :
(a) What control should be implemented to reduce the likelihood of each of the above?
(b) What is an audit procedure to detect or prevent each of the above?
Question 3 ( 3marks)
The following is an extract from a working paper containing the results of the tests of controls in the
accounts payable area:
Test Result Conclusion
Selected a number of supplier Six out of 50 invoices tested had Accepted as the
invoices and checked that the not been authorised .Incorrect discounts errors in the
pricing and discounts have been were recorded for these invoices.A follow discounts claimed
reviewed and authorised by the up of the four incorrect invoices did not were immaterial .
purchasing manager not highlight a pattern or specific reason
for the errors.
Required:
(a) Identify the key assertion addressed by the test procedure .
(b) Provide an explanation as to why the conclusion reached is appropriate or inappropriate.
(c) Outline the key control procedure that you believe needs to be performed.
AUDITING ASSIGNMENT 2
AUDITING: ASSIGNMENT
ANSWER THESE QUESTIONS:
1) In your opinion, should there be limits imposed on an auditor’s liability? Support your answer with relevant arguments. Write in 200words with 2 references
2) What is the ‘audit trail’ and what combination of procedures is normally involved in the auditor’s use of it? Write in 200words with 2 references
3) What purpose is served by engagement letters? With reference to the relevant auditing standard, list the content of an engagement letter. Write in 200words with 2 references
4) With reference to ASA 570 going concern, summarise an auditor’s responsibilities in relation to going concern of a client at the planning stage. Write in 200words with 2 references
5) Assessment of what is material is a matter of auditor judgement.’ Explain with reference to both qualitative and quantitative materiality assessments. Write in 200words with 2 references.
6) Discuss substantive audit procedure for Payroll cycle. Write in 200words with 2 references.
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